The 57-year-old, a former coach of the year in the Australian league, replaces Brent Matehaere, who was axed late last year.
"The New Zealand league has been a really good, competitive league for a long time now, and the timing of where I’m at in my career gives me an opportunity to coach there now, which I’m super excited about," Kelly said in a statement.
"We’re in the middle of our recruiting phase right now, but in terms of what our list is going to look like this season, we’re looking to keep a strong local core, along with adding some length and athleticism with our import crew."
Kelly brings with him a long coaching and playing resume which includes plenty of highs and lows.
The American national grew up in California and had a two-year stint at Orange West College before being recruited to Westmont College for his final two years.
The swingman declared for the NBA draft in 1989 but was not picked up.
After college, he moved to Taiwan for a year before settling in Australia and going on to play the Australian National Basketball League.
He helped the South East Melbourne Magic win the championship in 1996 and was named the most valuable player in the final.
He collected the NBL best defensive player title with the Magic in 1997 and 1998.
Kelly also had one-year stint with the Victorian Titans and five seasons with the Townsville Crocodiles before rounding out his playing career with two seasons for the Wollongong Hawks.
He moved back to the United States after retiring and did some coaching at college level before returning to Australia and working as an assistant coach for Townsville then Melbourne United, whom he helped win the 2017-18 title.
He was appointed head coach of the Cairns Taipans in 2018. He had a tough first season with Taipans, who won only six of their 28 games. But they finished third the following season and Kelly was named ANBL coach of the year.
The Taipans returned to the bottom of the standings in Kelly’s third year and he was axed.
He joined the Perth Wildcats on a two-year contract as the associate head coach and in 2023 was appointed head coach of the South East Melbourne Phoenix but parted ways with the club in October last year.
Otago Nuggets general manager Angela Ruske welcomed Kelly’s appointment.
"Mike is an outstanding coach with a remarkable basketball pedigree," Ruske said.
"His ability to develop talent, build cohesive teams and drive success is exactly what we were looking for in our next head coach.
"The Otago Nuggets have a proud history, and we are confident Mike’s leadership will take the team to new heights in the upcoming NZNBL season."
Kelly becomes the second Australian coach to be the fulltime Nuggets coach, following Rick Castle, who had a 5-31 record in 2006-07.
And he has little time to waste.
The Nuggets’ opening NBL game is at home against the Southland Sharks on March 14.
